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Renting out a room while not primary residence?

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  • 07-03-2016 4:39pm
    #1
    mcgrate
    Registered Users Posts: 131 ✭✭


    Hi everyone,
    Currently own a 3 bed townhouse and in negative equity so cannot sell. Buying a new house and planning to rent existing townhouse. My mam is currently living with us because she has nowhere else to go and only paying minimal rent when she can. When we move, the plan is for my mam to stay in the townhouse and to rent out the other two rooms.
    Will we be able to rent out two rooms while not living there? I'm not expecting to claim rent-a-room scheme or anything but wondering if its possible to rent rooms while we are not living there?
    There wont be a lease because my mam will be the primary tennant. Can we rent 2 rooms without giving a lease?
    Thanks in advance for any advice.


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    #2
    Mrs OBumble
    Registered Users Posts: 25,966 ✭✭✭✭Mrs OBumble


    From a tenancy perspective, your mam should be the one who rents out the rooms, not you. So people feel like they are living with the owner.

    From a tax perspective, your mam hands to the cash to you - and she is providing security services to you at the house, in exchange for receiving cheap rent.


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    #3
    mcgrate
    Registered Users Posts: 131 ✭✭mcgrate


    Thanks Mrs O Bumble!

    Is she obliged to do a lease for renting a room ? What is the difference in her renting out the room and me renting out the room? Do you mean the rent should go into her account?
    Would we need to register with PRTB? Is it compulsorary for renting out a room?
    Can we declare rental income without being registered and a lease?


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    #4
    Mrs OBumble
    Registered Users Posts: 25,966 ✭✭✭✭Mrs OBumble


    mcgrate wrote: »
    Is she obliged to do a lease for renting a room ? What is the difference in her renting out the room and me renting out the room? Do you mean the rent should go into her account?
    No. She is living in the house, and sub-leasing the rooms. From a tenancy perspective, she is the landlord and because she lives there, so no leases are relevant, and the tenants have no rights. If you were letting out the rooms, then the tenants would have rights.

    mcgrate wrote: »
    Do you mean the rent should go into her account?
    She can tell people to put the rent into whatever account she wants to. To keep things simple, having them put it into your account sounds like a good idea.


    mcgrate wrote: »
    Would we need to register with PRTB? Is it compulsorary for renting out a room?

    No. Not when the landlord is living in the house.

    mcgrate wrote: »
    Can we declare rental income without being registered and a lease?

    Yes. You declare it as income to Revenue. They require you to be registered for rent-a-room relief, but you are not going for that. It's just income.





    Realistically, even if your mam had her kids young and is the hip-coolest grannie in town, potential tenants are going to be house-sharing with a middle-aged to older woman. This won't be a massively attractive proposition, but may work if there's a massive accommodation shortage. But most likely your mam will end up running the place more like digs than like a regular house-share.


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    #5
    newacc2015
    Closed Accounts Posts: 2,379 ✭✭✭newacc2015


    Do you have a mortgage on the townhouse? If so, you might want to give your mother a lease. Register with the PRTB and claim mortgage interest relief


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    #6
    mcgrate
    Registered Users Posts: 131 ✭✭mcgrate


    newacc2015 wrote: »
    Do you have a mortgage on the townhouse? If so, you might want to give your mother a lease. Register with the PRTB and claim mortgage interest relief

    Yes we have a mortgage. I was told we would lose our mortgage interest relief once its not our primary residence? It is 100 a month so if we could keep it, it would be amazing!


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    #7
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    If your mam signs the lease for the entire house it look like she will be able to avail of the rent-a-room tax allowances for sub-letting the other bedrooms.


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    #8
    digzy
    Registered Users Posts: 3,049 ✭✭✭digzy


    Graham wrote: »
    If your mam signs the lease for the entire house it look like she will be able to avail of the rent-a-room tax allowances for sub-letting the other bedrooms.

    You sure?

    Mother isn't the owner


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    #9
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    digzy wrote: »
    You sure?

    Mother isn't the owner
    You do not have to own the property – you could be a tenant and be sub-letting to someone else. (In such cases, you would have to check with your own landlord that sub-letting is allowed
    Source: http://www.citizensinformation.ie/en/housing/owning_a_home/home_owners/rent_a_room_scheme.html


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    #10
    April 73
    Registered Users Posts: 846 ✭✭✭April 73


    mcgrate wrote: »
    Yes we have a mortgage. I was told we would lose our mortgage interest relief once its not our primary residence? It is 100 a month so if we could keep it, it would be amazing!

    You won't keep your mortgage interest relief.
    If you register the tenancy with the PRTB you will be able to write 75% of your mortgage interest cost off your tax bill.


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    #11
    [Deleted User]
    Posts: 24,714 ✭ [Deleted User]


    Graham wrote: »
    Source: http://www.citizensinformation.ie/en/housing/owning_a_home/home_owners/rent_a_room_scheme.html

    The mother will be able to avail of the rent a room scheme and wont have to pay tax on the money she is getting from the other people in the house. The op will still have to pay tax on the money he receives from his mother though.


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    #12
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Eliezer Happy Berry wrote: »
    The mother will be able to avail of the rent a room scheme and wont have to pay tax on the money she is getting from the other people in the house. The op will still have to pay tax on the money he receives from his mother though.

    That's my understanding too.


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    #13
    mcgrate
    Registered Users Posts: 131 ✭✭mcgrate


    Eliezer Happy Berry wrote: »
    The mother will be able to avail of the rent a room scheme and wont have to pay tax on the money she is getting from the other people in the house. The op will still have to pay tax on the money he receives from his mother though.

    Can she then give us the money? :-D


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    #14
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    mcgrate wrote: »
    Can she then give us the money? :-D

    Yes but that transaction will be a normal rent payment so will be treated as rental income for tax purposes.

    Your mother would be availing of the rent a room relief, you wouldn't.


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    #15
    digzy
    Registered Users Posts: 3,049 ✭✭✭digzy


    mcgrate wrote: »
    Can she then give us the money? :-D

    She can give you the Money and you pay the tax declaring it which is the correct way which I'd advocate

    <MOD SNIP >


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    #16
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    OP- MIR is being phased out completely over the next 2 years- so don't use the 100 a month you're currently getting as a basis for anything whatsoever.........

    Note- if you are letting the property to your mother with the express intention of allowing her avail of the rent-a-room scheme- she needs to be a legal tenant in the property. You must rent the property to her at fair market value- and be seen to do so.

    She can avail of the rent-a-room scheme- having licensees share the property with her to the maximum of the scheme ceiling tax free.

    You have to register your Mum's tenancy with the PRTB (in order to allow her avail of the rent-a-room scheme). You have to specify the fair market rent for the property. She can then go off and get herself a housemate to her hearts content.

    You have to declare the rental income in an annual tax return- 75% of the mortgage interest is deductible as an allowable cost- as are some other expenses (such as management charges etc), you cannot deduct costs for any maintenance/cleaning etc carried out by you or any family member (including your Mum).

    The net income is taxed at your marginal rate.

    You *have* to be fully upfront with all of this- aside from anything else- if you're not- the rent-a-room allowance for your Mum becomes void- and she would have a tax liability for any rental income she got, and absolutely no costs whatsoever that she could offset this against.

    You also have to be damn careful that you do not give a licensee any rights they are not entitled to under the consolidate RTA.

    Note- this scenario often is addressed in the opposite manner (parent owning the property- allowing a child to live there, claim rent-a-room relief etc). Its not expressly prohibited by Revenue- they do take a dim view of it though- you need to be 100% certain that you do absolutely everything by the book- as the penalties for even an innocent mistake are penal in nature. Do not play games with Revenue under any circumstances- you will not win.


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    #17
    mcgrate
    Registered Users Posts: 131 ✭✭mcgrate


    Thanks All.
    Conductor - we absolutely want to do things by the book. I'm just wondering what the best way to do this is. My mam cannot afford market-value rent. Its a 3-bed house so we're thinking she'll stay in one, and we'll rent out the other two rooms. The whole thing with rent relief will totally confuse her - she is in her 60's - I dont want to stress her out having to handle money and deal with revenue.
    Can I rent the rooms out myself when I dont live there (but do own the property) and declare the income?


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    #18
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    No- you cannot rent out bedrooms, and claim the rent-a-room relief- unless you are physically living in the property. Any rental income at all- unless you are physically living in the property- is taxed at your marginal rate.

    If you let the entire property to your mother (and Revenue will in all probability question this- and you will have to be able to show that its done on a commercial basis- with the tenancy and rent registered with the PRTB etc)- your mother can then claim the rent-a-room relief from the income she gets from the people she shares the house with.........

    You cannot claim the rent-a-room relief- unless you are either the owner-occupier- or are the renter of the property- and it is your principal private residence.

    Revenue are wise to all manner of machinations- don't go there........


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    #19
    mcgrate
    Registered Users Posts: 131 ✭✭mcgrate


    The_Conductor wrote: »
    No- you cannot rent out bedrooms, and claim the rent-a-room relief- unless you are physically living in the property. Any rental income at all- unless you are physically living in the property- is taxed at your marginal rate.

    Sorry Conductor I should have clarified, we have no interest in claiming rent-a-room relief. I simply want to rent out 2 rooms in a house I own but do not live in.


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    #20
    The_Conductor
    Moderators, Society & Culture Moderators Posts: 32,285 Mod ✭✭✭✭The_Conductor


    mcgrate wrote: »
    Sorry Conductor I should have clarified, we have no interest in claiming rent-a-room relief. I simply want to rent out 2 rooms in a house I own but do not live in.

    You can rent them out to your heart's content- however, its taxable income (less any allowable deductions). Also- you can't offset rental income in one property- against rental outgoings in another property- which is a massive inequity- however, that's for another day..........


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    #21
    mcgrate
    Registered Users Posts: 131 ✭✭mcgrate


    The_Conductor wrote: »
    You can rent them out to your heart's content- however, its taxable income (less any allowable deductions). Also- you can't offset rental income in one property- against rental outgoings in another property- which is a massive inequity- however, that's for another day..........

    Great thanks for the information Conductor. I wouldn't expect the income to be anything other than taxable :)


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    #22
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    It's worth making sure that anyone sharing with your mother is a licensee and not a tenant.


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    #23
    irish gent
    Registered Users Posts: 240 ✭✭irish gent


    So Can I rent a room out in my house tax free ? after reading all this..


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    #24
    mcgrate
    Registered Users Posts: 131 ✭✭mcgrate


    Yes - if you live in the house. And up to 12k a year in revenue.

    http://www.citizensinformation.ie/en/housing/owning_a_home/home_owners/rent_a_room_scheme.html


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    #25
    Mrs OBumble
    Registered Users Posts: 25,966 ✭✭✭✭Mrs OBumble


    mcgrate wrote: »
    Yes - if you own the house. And up to 12k a year in revenue.

    http://www.citizensinformation.ie/en/housing/owning_a_home/home_owners/rent_a_room_scheme.html

    Ahhh, that should be "yes, if you live in the house"


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